What do I need to keep in mind (tax-wise) in order to sell patterns?

Hello dear everyone,

since my last post in the forum over 2 months ago, when I found out that I’m not allowed to sell my Homer Simpson crochet pattern, I haven’t been very active here... But now I’ve finally finished my first self-created figures and just need to put the pattern into a nice format :)

I suspect all this information can be found somewhere here, but I’m still not really finding my way around... So it would be great if someone could still help me out again or send me a link where it’s explained well.
I’d just like to sell a little bit here alongside my full-time job, so not run a “big” business, and since I’ve never done anything like this in my life and haven’t even had a side job, I don’t know what I need to keep in mind now.

-Do I have to register this somehow somewhere in advance?
-Is there a minimum amount / month that makes it necessary for me to report it? (I’m just thinking of the €450 job, which you’re allowed to do on the side...)
-Do I have to include the whole thing in my tax return at the end of the year? Do I definitely have to file one? (I haven’t had to so far)
-Do I have to register a small business because of a few patterns?
-What about an imprint or something like that? I’ve heard about that before; do I have to do that too?
-What else do I need to keep in mind that beginners often forget?

Sorry for all the questions, but I just don’t want to do anything wrong :) Maybe someone else felt the same way at the beginning.

Thank you very much for your answers :)

Hi!

First, you should read your employment contract carefully to see if you’re even allowed to have a side job—if you’re unsure, it’s better to ask your boss!
Then you’ll need to go to the local office to register your business (you can apparently offer patterns even without a registered business if you’re registered as an “artist,” but the office should be able to clarify that for you).
You’ll have to file a tax return (the key term here for the side job is “profit and loss statement”), because now you have income not only from employment (I assume you’re in tax bracket I, II, or IV; otherwise, you’d be subject to mandatory assessment anyway!), but also from self-employment.
As a small business owner, it’s up to you whether or not to opt into the VAT system; consult a tax advisor for guidance on this.
However, you must remit VAT on sales to other European countries in any case!
You must have a legal notice! (Even though some people here don’t seem to take this very seriously, there’s always the risk of a warning letter!)
A right of withdrawal is also mandatory—and the legal requirements for this must be strictly followed!
You’ll also need to report your side business to your health insurance provider—there are limits on the time spent and the amount earned!

Yeah, that’s it for now.

I hope I was able to help!

Best regards, Nina

Oh, right—there’s no minimum amount required! What you’re thinking of is a “minijob.” But with that, you’re employed by someone else.

Hello,
yes, that is a lot of questions. I faced them myself years ago.

What I can definitely answer for you right away is that there is no such thing as: "Selling a little, so not doing big business." If you offer patterns for sale here in a public space, then you are acting commercially!

The first steps would be:

• If you have a full-time job, you need your employer's permission to run a "side business."
• You have to get a trade license from the city. The fees for that vary from city to city (I think mine was €25)
• Once you have the license, you will automatically receive mail from the tax office. There you have to apply for the small business regulation so that you do not have to show and remit VAT. However, there are exceptions for sales within the EU. Here, even as a small business owner, you are obligated to remit VAT to the individual countries. But this can also be done bundled through the MOSS procedure. Or you transfer this tax obligation to CP and pay a correspondingly higher commission
• You will also receive mail from either the Chamber of Industry and Commerce or the employers' liability insurance association, depending on what is stated in your trade license.
  
• For the tax office, you have to prepare an annual income-surplus statement (EÜR)
• Legal notice and right of withdrawal are mandatory information for online business

Those would be the first points that come to mind off the top of my head. There is definitely more that needs to be considered.

Don't let it scare you. It is quite a lot at the beginning, but everyone has to go through it at the start.
Best regards
Petra

First of all, thanks for your answers.
Wow, there’s actually quite a bit to do… I kind of underestimated that.

Well, according to my employment contract, I’m allowed to have a side job—but I have to “report it immediately.” So that should work out :) (Quite apart from the fact that there’s going to be a change in management anyway… he probably won’t care either way.)

After your already very informative answers, I’ve got another 100 questions swirling around in my head—I think it would be best if I first talked to someone from the city administration on the phone…

Just a few more that I’m specifically interested in:

-Do I need to have a “business name” before I register there? Or is it enough to provide info like: “Monika Mustermann runs a small business” and then I can just start selling?
-Are there any annual fees?
-Do I have to report any expenses I incurred at the end of the year? Like material costs or something similar? (In this case: yarn.) That would be a bit complicated...

Thanks again! It’s really confusing :D

Hello again!

Regarding expenses:
It’s obviously very (!!!) important for you to keep track of your expenses and report them as part of your profit and loss statement (or EÜR = income-surplus statement), because these expenses reduce your profit and thus your tax burden!
In other words: You register your business and buy yarn. Be sure to keep the receipt!
Collect and report all expenses incurred as part of your business activities!

You’re required to have a “business name,” though theoretically your “regular” name is sufficient.
Otherwise, you already have a username here. If that’s the name you plan to use for selling, list it as your business name.

Annual costs:

Yes! For the Chamber of Crafts/Workers’ Compensation Association, and possibly a tax advisor.
These costs are also important for the EÜR! After all, they’re necessary business expenses.


Yes, it seems like a mountain to climb at first, but it’s not that hard to tackle.
And over time, you’ll develop a routine, and everything will go faster and more smoothly… just like crocheting :)

Best wishes

Hi again, and thanks so much once more! :)

I just can’t imagine that EVERY SINGLE PERSON who sells here or anywhere else has actually gone through all these steps. But I definitely don’t want to do anything wrong or evade taxes or anything like that :D

Well, guess I’ll have to pick up the phone and call city hall now! And then we’ll see if it’s even worth the trouble. After all, I don’t want to end up paying a ton of money to the authorities and everything else if I really don’t list much and might barely sell anything.

Thank you so, so much!

Hi SchokoCookie91,
welcome to our portal and forum.
As soon as you’ve uploaded your first pattern, you’ll automatically be granted access to the authors’ forum. There you’ll also find information on all other aspects of selling patterns.
You’ll just have to get through the paperwork now, but everyone else had to do that too. As Nina/Zwergnasebär already mentioned, it gets easier over time, even if there seems to be a lot to learn at first.
It’ll all work out. Good luck.

Here’s a little tip from me:

If you’re on Facebook, there are also groups specifically about this topic. “Small crochet and knitting businesses,” for example — you can find quite a bit of information there as well. But of course, it’s always better to ask the relevant authorities directly, since there are also a lot of non-expert opinions floating around online. It’s not nearly as bad as it sounds at first.
Of course, not everyone here has registered a business; many also have neither a legal notice nor cancellation policy information. But it’s better to do it properly and not look at what others are doing — in the worst case, it could get very expensive.
Wishing you every success and all the best

Best regards, Claudia

Hi SchokoCookie91,

Just a quick addition from me: You can already start collecting your receipts and supporting documents (e.g., for consulting fees)—even before you’ve officially registered as self-employed. You can then claim them with the tax office as pre-opening business expenses. These receipts can date back up to 3 years before you registered; you just need to be able to prove that the costs were incurred as part of your preparations for self-employment.

Best regards, Inna

Hello, dear Josefa and dear Claudia,

thank you so much for your answers as well.

Of course, I want to do everything right and play by the rules—I’m always sensitive about this, whether I get caught (and fined) or not ;) (I’m also the kind of person who’s constantly lecturing others when they watch movies for free online :D)

Since the relevant contact person at city hall wasn’t available, I sent her an email. Now it’s time to wait and see :) Let’s see what comes back.
If registering a small business ends up being too expensive for just 1–2 patterns, I’ll just have to get a little more creative and post more :) (And if worse comes to worst, I’ll just have learned a lesson the hard way ;))

I look forward to seeing you all soon in the authors’ forum :)

...and thanks, Inna! :) (Our posts crossed)

Darn, I always just threw the receipts away... I bought something here, something there... Then I got some things as gifts... Oh well! I’ll be more careful from now on :)

One last question for everyone (for now ;)):
Would you recommend registering under a nice name? (I don’t really want “Schokocookie” as my business name ;) I just came up with that on the spur of the moment to create an account.) Or would it be better to just use my first and last name? What did you do \/ what would you do? :) (Looks like I’ll have to get creative again!)

Hey there!

A nice, catchy name is great and important! That way, potential customers will remember it!
But here’s something else to keep in mind: don’t use anything that already exists (and might even be protected! Just because it isn’t explicitly marked as ©-protected doesn’t mean you can use a name “with impunity”! There are websites where you can check whether certain product or business names exist and, if so, which product categories they’re protected for).

And I think you’re well prepared, even if it all seems like a lot right now!
You have the basic qualities: a thirst for knowledge, honesty, and (probably) plenty of imagination and creativity.
Sure, you won’t generate huge sales with just two patterns, but where two patterns “spring up,” there are sure to be more ;)

Best wishes—Nina

Hey there,

actually, most of it’s already been covered.
I just wanted to put your mind at ease about it potentially getting expensive.
I don’t know how it works in other federal states. After I registered my business, the Chamber of Industry and Commerce (IHK) wrote to me and sent me a questionnaire. Since I’m keeping it as a side business, I’m exempt from fees in that regard.
And as a small business, you’re not required to hire a tax advisor. Well, at a certain point, I think it makes sense to do so, but theoretically, you can also do it yourself.

Best regards and good luck with starting your business!

Okay, that sounds great so far :) Thanks a lot! :)

So the financial risk is probably mainly the unbelievable €27 in fees I have to pay to the city :) (I got the answer and the form to fill out), I’m happy to take that risk :D The only other risk is that I’m “wasting” time, but I’d probably spend that time crocheting anyway, so it’s all good :)

For now, I’m still waiting for a response from the local contact person for new business owners at the tax office. Maybe they’ll have something else to tell me. Better safe than sorry :)

Hi @Birgit:

In Germany, there’s generally no obligation to hire a tax advisor, whether you’re a one-person small business owner or a company with 10,000 employees.
If you WANT to and CAN do it yourself, you’re free to—but if you have no idea what you’re doing, you should get help—at least at the beginning.

Best regards, Nina

@ Birgit,
Just to clarify, in case this was in response to my post: By “it can get expensive,” I meant that if you don’t have a legal notice or a cancellation policy, you risk getting a cease-and-desist letter from a lawyer.
Otherwise, of course, nothing is expensive. I ALWAYS file my tax return myself.

Best regards, Ckaudia

On the topic of tax advisors:
When I started selling crocheted and knitted items about 9 years ago, I simply scheduled an initial consultation with a tax advisor near me. I asked the questions I’d written down beforehand and got helpful answers. When I tried to pay, the tax advisor kindly waved me off. I then put a little something in the coffee fund.
For my cash-basis accounting (EÜR), I bought a book. There are plenty of them on the market. I still have it, but I don’t need it anymore. If you send me a private message, I can send it to you.
Best regards, Petra

I think my phone ate my last post. oO

@Claudia: No, no. It just seemed to me like she was starting to worry about the costs that are coming up.
  And for now, there aren’t necessarily any high costs coming up. But I wasn’t talking about you. You’re right about what you wrote. But that’s because these are legally established rules, and anyone who doesn’t follow them has only themselves to blame.
So somehow I’ve written a lot more than I intended, and I hope I didn’t write so stupidly that you can understand me. 

lol....it’s all good....write as much as you want ;-)
I get it...hihi

I just want to say thank you, thank you, thank you again! You’ve helped me a lot. Now the whole plan doesn’t seem quite so unrealistic anymore, and I’m not afraid of ending up in financial ruin either :)

Now I’m just stuck on the name.

Maybe someone has some advice on that too... I’ve come up with sooo many things, but of course all the great ones are already taken. (Maschenwerkstatt, Häkelzauber, Wollwunder, SuperLoop, ...so many possibilities.)

Can I use a name that’s already “taken” if I put my first name in front of it? Tina’s Maschenwerkstatt, Tina’s Häkelzauber, Tina’s Wollwunder, .... you know what I mean :D

If this helps at all: My business license has my name on it!

Off the top of my head, “Wolltini” comes to mind, but first of all, the name has to suit you.
And second, I can only say that I’d choose a different name for my “Beautiful Things Made of Wool” today, but then I’d confuse my customers.
:-D

I’d be careful with the names—just putting your own name at the beginning or adding it at the end might not be enough.
For example: I couldn’t just call myself “Nina-Converse,” because that would lead to a looooot of trouble and even bigger fines...
As I wrote, you can check on various platforms (I’d have to ask my husband which ones exactly… but he’s fast asleep in front of the TV ;)—but you can find that out yourself) to see what’s protected and in which areas.

Best regards, Nina

Now I’d like to add my two cents regarding the company name:

Only companies that are registered in the commercial register, prepare financial statements, or are corporations are allowed to use a company name. You’ll be a small business owner at first, so your business registration must be in your first and last name.
Of course, you can choose a brand name for your shop, but your first and last name must be included under the brand name in the legal notice. This also applies to any invoices you issue.
Your business operates under your own first and last name as a sole proprietorship.

Best regards, Evi

I wouldn’t really like it if someone called themselves “Tini’s Woolness Oasis” or “Tini’s Woolness Designs.” Although legally, I couldn’t really do anything about it, since the names aren’t protected.  ;-)

But I’d also choose a name with some memorability, maybe one that includes your first name or part of it.
I thought “Wolltini” was pretty cute too. Take some time to think it over and get creative—play around with letters and languages. It doesn’t necessarily have to be in German. I had a blast doing that back then. :-)

Hi there,
for anyone who needs affordable guidance: http://www.aktivsenioren.de/
Here, you pay a one-time fee—it used to be 100 EUR—and then, as a startup founder, you get wonderful support from retired business professionals. It can save you a lot on tax advisory fees. For employees, there are also the so-called “income tax assistance offices,” which are significantly cheaper than tax advisors.
I’ve also had good experiences contacting the tax office directly—I highly recommend it.

Hi Waltraud,

the tip about seniors is certainly a good one, but I can’t judge that.
But not the one about the income tax assistance associations.
For one thing, you actually join an association where you have to pay dues, whether you use their services or not. And second, once you have self-employment income, you’re no longer eligible for their services. Plus, they’re not allowed to advise you on that.

Best regards, Nina

Hi everyone :)

I’m following up briefly on this topic—maybe someone has some more advice.
The last update was that I was waiting for a response from the tax office because of some unresolved questions—and I’m still waiting... (I wanted him to explain the process to me again personally regarding all this tax stuff.)
The person in charge tried to call me... Because of work, I couldn’t answer, so he just wrote back: “I couldn’t reach you by phone; please call me at....” I’ve tried that—about 100 times since then... I just can’t get through to him! (And since I’m working, I can’t be on the phone 24\/7 either.) I couldn’t get through to him via the switchboard either...

No matter who I ask among my friends about this... Everyone says I should just register a small business—it’s no big deal, don’t worry... But they always add: “I’d talk to the tax office again, though.” --> Great.

What do you think: Should I just send in that stupid business registration form (which I’ve had all ready at home for ages)? What would you do? I just want to get started already :D

Hi SchokoCookie,

I’m not sure exactly what specific questions you still had for the tax office—but if you want to sell patterns here, you’ll need to register your business anyway.

And shortly after you register your business, the tax office will contact you and will want, among other things, an estimate of your income for the next 1–2 years (to see if you qualify for small business status—and you do as long as you stay under 17,000 EUR per year).

Then all you have to do is collect your receipts and, at the end of the year, prepare a simple income-over-expenses statement, which you’ll then include in your regular tax return under “Income from self-employment.”

The business registration itself is relatively quick—I sent mine in by mail and it took about a week. If you go in person, they’ll usually process it right away.

Best regards, Stefanie
Aramis-von-K

Thanks :)
I was actually just asking again the questions I’d already had answered here and by people I know (costs, obligations, what else to keep in mind....)

It just made me a little unsure because everyone I asked (in person, not here) said I should talk to the tax office again... But I think I’ll just send it in...

I’m already looking forward to having to estimate how much income I’ll make :) Of course, it’s hard to say when I’ve never sold anything before ;)

So then... I’ll send it in today or tomorrow... My first pattern will be out in 1–2 weeks :) (Probably the one I have as my profile picture as the “bigger” one / amigurumi, properly finished up nicely, but maybe I’ll start with the keychain first—we’ll see :) )

Well then, I wish you the best of luck! :-) I’m already looking forward to your patterns!

Hi,

how’s it going with your business registration? Can you share your experience after registering?
Have all your worries been resolved?

Hi :)

My business registration was almost 3 years ago now too, and yeah...
At the beginning, it’s quite a lot of back and forth... There’s a lot of paperwork, and a new challenge keeps coming up. (At least that’s how it was for me; there was always some kind of nonsense)

Personally, I’m lucky that, because of my studies, I know my way around all the financial stuff reasonably well and don’t need an additional tax advisor or anything like that... That’s something you shouldn’t forget about either. 

Once you’ve worked your way through it, it’s okay, and then you can also focus on writing patterns. 

My tip, which I just want to pass on to everyone: Very few people get rich from this “side job.” For most, it’s a nice bit of pocket money (which you should never, ever convert into €/hour worked), and some even have to struggle to end the year in the black. Lots of people also show up here as authors for a while, but after a short time disappear into obscurity again. 
A few very talented and good pattern authors, however, do make a living from this job or earn really good money on the side with it. 

But if this is truly a hobby and you love the challenge, it’s absolutely worth it. If necessary, the business can be deregistered again quickly :) 
In any case, I have not regretted it.

Hi everyone,

I’d also like to offer patterns and have read the posts here carefully.
I have a question about the legal notice and the cancellation policy. Do both have to be included here on the platform? I haven’t been able to find that information anywhere so far.

Thanks!

Best regards,
Karsten

Hi Karsten. You’ve found an old post that might not be entirely up to date anymore.
No, you don’t need to have a legal notice or a notice of right to object. Only CP needs those.